Take cue from no-frill airlines, Air India told

March 29, 2013 20:30 IST

An official panel that recommended measures to enhance savings of ailing Air India, has suggested that the national carrier take cue from no-frill airline model and prune costs, including those on its 26,000-strong staff.

While the pay scales and allowances of Air India employees have been given final shape by the Dharmadhikari Committee, the five-member panel headed by headed by IIM-Ahmedabad professor Ravindra H Dholakia is understood to have recommended that the airline conduct technical efficiency audit for manpower rationalisation.

This audit should determine whether a voluntary retirement scheme should be offered or staff redeployed or manpower strength slashed, official sources said on Friday.

The Dholakia committee, set up in January to recommend measures to cut Air India's costs and increase savings in line with the best global practices, studied ways to reduce its daily operational deficit of Rs 14 crore (Rs 140 million). Its report was presented to Civil Aviation Minister Ajit Singh on Thursday.

Among the 46 recommendations made by the panel is that the national carrier should seek government nod to issue tax-free bonds of Rs 10,000 crore (Rs 1,000 billion) to enable it retire its high-cost debt, they said.

Apart from scrapping of flights to economically unviable routes that do not recover the costs incurred, this measure is estimated to lead to a net saving of Rs 600 crore (Rs 6 billion) per year, they said, adding that fuel efficiency measures could also result in a saving of Rs 400 crore (Rs 4 billion) annually.

Noting that passengers buy tickets from agents and the airline ends up paying one per cent commission to them, the Dholakia panel has suggested shifting to the 'zero commission' norm as per global practice and asking agents to charge a service fee, the sources said.

Other measures suggested by the panel include selling meals on board, charging for pre-selection of seats and stricter implementation of penalties on excess baggage.

The Committee also favoured serving only tea, coffee, cold drinks, peanuts and biscuits free of cost to economy-class domestic passengers, instead of meals served now. Passengers should pay for anything additional like a meal or a sandwich.

This step alone would slash the cost on meals from about Rs 175 to Rs 25, official sources said, adding that if all recommendations were implemented, it could lead to an annual saving of over Rs 3,200 crore (Rs 32 billion).

Apart from shutting down 18 of its foreign offices where the airline does not fly, the committee has suggested that the airline crew on international flights be put up at hotels near the airport instead of those downtown.

This would reduce hotel as well as transportation costs by as much as one-fourth, the sources said.